US independent schools struggle to balance priorities: increasing access or affordability?

| September 5, 2013 | 0 Comments

By Kristen Power and Myra Mcgovern

The median independent day school tuition in the United States increased 30.8% in inflation-adjusted dollars between 2002–2003 and 2012–2013, according to statistics from the National Association of Independent Schools (NAIS), based in Washington, DC.

Meanwhile, the US Census Bureau reports that the average income in the United States remained stagnant. As the percentage of families able to afford tuition without assistance declined, many schools have grappled with ways to balance competing demands: on the one hand, they must derive tuition revenue in order to support the school; on the other, they want to make their schools accessible to students from diverse backgrounds.

A commitment to diversity

The schools that belong to NAIS are all governed by independent boards of trustees. They are independently financed, primarily through tuition, charitable contributions and endowment income. They are classified as non-profit organisations under the US tax code, a designation that allows organisations that provide an educational or public benefit to solicit charitable contributions and avoid paying property taxes, among other things.

Most independent schools offer financial aid based upon the financial need of applicants’ families. These grants do not need to be paid back and are used to offset tuition costs. The money for these grants comes directly from schools’ budgets and demonstrates schools’ commitment to having a socioeconomically diverse student population. In 2012-13, 22.9% of all students in independent schools received need-based financial aid.

NAIS offers financial aid template and guidance

Many NAIS schools use the Parents’ Financial Statement from the School and Student Service (SSS by NAIS). SSS helps schools objectively determine a family’s ability to pay for school tuition and other educational expenses. Parents submit information about their incomes, assets and expenses, and SSS calculates how much they could reasonably afford to spend on educational expenses. That information is sent to the schools that each family designates, and the schools award financial aid.

The amount of aid a family receives may vary considerably from school to school. The size of its endowment, its tuition costs and its philosophy of awarding aid affect how much aid a school offers. Each school may suggest different strategies and may have different policies.

To ensure that they are accessible to families from diverse backgrounds, independent schools have grown their financial aid budgets dramatically. To mitigate the ‘barbell effect’ (students from very wealthy and very poor families disproportionately represented among the student body, and students in the middle-income brackets largely absent), administrators made a conscious effort to attract more middleincome families, tweaking financial aid policies and working more intentionally to communicate about the availability of need-based financial aid for middle-income families.

Recession has changed profile of families in need

But, in part due to the 2007-2009 recession in the US, the profile of families applying for financial aid has shifted over the years beyond families that would be considered lower or middle income. According to data from SSS by NAIS, in 2002–2003, 78.9% of applicants reported total family incomes below US$100 000 per year. In 2011–2012, however, 42% of applicants for need-based financial aid had family incomes over US$100 000 per year (including 21.2% with incomes over US$150 000 per year). Although this data does not include information about the income levels of families who actually qualified for or were awarded need-based grants, it is significant that the 42% of applicants for financial aid in independent schools earned more than double the median income for a family of four in the US in 2011.

In addition to more high-income families feeling as if they cannot afford independent schools without assistance, many schools have found that offering a small amount of aid to a middle- or upper-income student results in more net tuition revenue. In other words, a student who needs full assistance (US$20 000 or more at many schools) will pay no tuition, whereas offering 10 US$2 000 grants would conceivably net US$180 000 in tuition revenue and 10 enrolled students from the same financial aid investment.

This conflict between making independent schools more affordable for families who are relatively well off, versus providing access to families who would not have the means to attend independent schools without assistance, has been debated for many years within US independent schools. The debate, however, has been amplified by the financial pressures of a drawn-out recession and by increasing income inequality in the US at large.

Sustainability must equal social mission NAIS urges schools to evaluate the goals of their financial aid programmes as well as their policies regularly. The association, with the help of expert financial aid practitioners, developed the Principles of Good Practice for Financial Aid Administration (see below) to help schools administer their financial aid programmes as equitably as possible.

While the long-term financial sustainability of independent schools is critical, the social mission to provide a high-quality education that is open to students from all backgrounds – particularly given schools’ status as charitable organisations – is key.

Category: Spring 2013

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